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Bulls & Bears
Brenda was joined by: Gary B. Smith, columnist for RealMoney.com; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, editor ChangeWave Investing; Scott Bleier, president of HybridInvestors.com; Gary Kaltbaum, president of Kaltbaum & Associates; and Herman Cain, CEO of The New Voice.
Trading Pit: Market Madness
It's been a crazy couple of weeks for stocks. The Dow lost 500 points during the six trading days from April 12-20.
Then, on this past Thursday, a gain of 206 points, which is the biggest single day gain in about 2 years.
On Friday: another wild one. The Dow was down about 150 points in the final hour and then rallied in the last few minutes limiting the day’s loss to 60 points.
What happens next?
Tobin Smith: We've hit the bottom for 2005. Only a spike in oil prices could take us lower. Now you can start to buy. And if you’ve been holding on to some big, old tech like Microsoft (MSFT) or Cisco (CSCO), you can start to sell if we snap back. With these stocks you’re paying for growth, but there’s no growth. Also look to get rid of stocks of car companies and auto parts. I’d look to start buying stocks in energy, food, and titanium.
Gary Kaltbaum: I’m in the exact opposite camp! We topped out months ago and still have a lot more to go. We’re in a bear market. Let’s face it, bear markets happen. It’s not a bad word. You just have to step aside and let stocks go through the process. Bear markets have sharp rallies that make you feel good and then a few days later they bury you. That’s what happened this past week.
Herman Cain: Call me the Bulldog! I’m in between these bulls and bears. Now is the time to show some calm. We’re going to get some correction, but when you look at business fundamentals, there’s strength in a lot of businesses. This is not a time to panic; just know how to play the volatility. Now’s the time to start buying undervalued stocks. I like Whirlpool (WHR). (Herman owns this stock and is on its board.) And let’s not forget that the Dow did break below 10,000 and then rallied back against some very big economic odds.
Gary B. Smith: Over the next few months, we're going to go up. But first, we need to drop just a touch more. This is definitely a buying opportunity. In particular, tech has been the most despised and that’s where I’d look to buy. I especially like eBay (EBAY).
Scott Bleier: We have passed the washout phase. This is just a hiccup because gas prices went through $2/gallon. The economy can stand on its own two feet. I agree with Gary B. that we’re going a little lower. Then I thin you everything in sight because we’re at the end of a drop.
Pat Dorsey: Earlier this week, when stock were selling off, I was getting excited, because I was starting to see a lot of bargains. But the Thursday's gain, took some of it away. When Caterpillar (CAT) reported last week, it showed that there was amazing strength in China and North America. This demand from U.S. companies means the U.S. economy is healthy. There are some good stocks out there to buy right now, like International Game Technology (IGT) and eBay (EBAY). Usually when stocks get cut in half, it’s better to be buying than selling.
It’s Merger Mania! The "Bulls & Bears" pick the companies that could be bought out and make the stock skyrocket.
Pat: I like Steel Dynamics (STLD), which is a low cost producer of steel and is twice as efficient as rival, Nucor (NUE). One reason this could be taken over is that a lot of foreign companies with a lot of cash are looking to get around tariffs. Buying an American company, such as Steel Dynamics, is one way to do that. This stock is going to $40. (Steel Dynamics closed on Friday at $29.85.)
Gary K: I think the steel play is over. This stock’s already been hammered and economic growth has peaked.